12:00 AM, Aug 20, 2011 • By IRWIN M. STELZER
As if the economic news is not worrying enough, politicians around the world have decided to make things worse. The Chinese regime treated vice president Joe Biden rudely on his visit to Beijing to discuss economic issues of mutual concern—the rapidly depreciating dollar worries the Chinese, while the too slowly appreciating yuan is on Biden’s list of woes. So much for a coordinated effort to cope with imbalances. French president Nicolas Sarkozy and German chancellor Angela Merkel met to sort out the eurozone crisis and agreed that more meetings are needed. So much for calls to increase the bailout fund and make Germany’s balance sheet available to poorer countries. The European Central Bank has decided that the eurozone, with growth somewhere between zero and negative, really needs higher interest rates, not a policy most economists would consider rational. The Finns say they won’t go along with further bailouts for Greece unless the Greeks find something of value (sunshine doesn’t count) to offer as collateral, and the Austrians say that what is good enough for Finland is surely good enough for Austria.
Here, in America, Republican presidential candidates tripped over one another to display their ignorance of economic affairs, with the entire field promising Iowans and a national television audience never to raise taxes even in the unlikely event that the Democrats agree to cut spending by ten times as much. And the newest hot entry in the race, Rick Perry, rode in from his Texas governor’s mansion to promise to do “ugly” things to Federal Reserve Board chairman Ben Bernanke if he dared show his face in the Lone Star state, and perhaps even to try him for the near treasonous behavior of printing money in order to stimulate the sagging economy. Meanwhile, President Barack Obama chided Congress for not acting on several trade agreements, neglecting to mention that he has not submitted the agreements for congressional approval lest he antagonize the trade unions.
The world’s politicians have no monopoly on mischief making. Warren Buffett, the multibillionaire, weighed in with a complaint that his effective tax rate is too low, lending support to the president’s argument that “millionaires and billionaires” should pay more. Of course, there is nothing to stop Buffett from paying more: since 1843, the treasury has accepted donations “from individuals willing to express their patriotism to the United States.” But the Omaha sage says he prefers to put his billions into private charitable foundations, including three run by his children, because “they will do a better job with lower administrative costs and better selection of beneficiaries than the government.” Oh.
Buffett’s sally into tax policy is no trivial intervention. He is a much admired, folksy, shrewd investor whom no one begrudges the billions he has earned. But either deliberately or unwittingly he has lent support not to a tax on billionaires, which in any event couldn’t yield enough revenue to affect the rounding error in the nation’s debt load, but to Obama’s plan to raise taxes on individuals earning more than $200,000 per year, and families with annual incomes in excess of $250,000. As the Wall Street Journal points out, “Roughly 90% of the tax filers who would pay more under Mr. Obama’s plan aren’t millionaires, and 99.9% aren’t billionaires.” Many are the small business entrepreneurs on whom the president is relying to create the millions of jobs the nation so sorely needs.
Worse still, Democrats on the joint select committee on deficit reduction—the 12 members of Congress, six from each party, charged with finding $1.5 trillion in deficit reduction over the next decade, and reporting their finding by the end of November for a congressional vote—now feel more inclined than ever, if that is imaginable, to hold out for substantial “revenue enhancements,” tax increases, as part of any deficit reduction package. Republicans, of course, are equally dug in to their no-new-taxes-of-any-kind-ever position, all of which bodes ill for the committee, which has to figure out how to cut the deficit while paying for the entitlement programs that are set to bankrupt the nation as our baby boomers, rich as well as poor, tap the health care system for hips, knees, organs, and other benefits made available by advances in medical technology.
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